First Hire, First Payslip: A 90-Day Payroll Countdown for Very Small UK Employers

The day you stop being a one-person band

Hiring your first employee is a milestone. It is also the day payroll admin arrives, whether you asked for it or not. You cannot just add a new name to a spreadsheet and hope for the best. HMRC wants you registered as an employer before the first payday, and real-time information — RTI — wants payroll data on or before every payday. The good news is that 90 days is enough runway if you use it properly.

This is the practical checklist nobody hands you when you move from sole trader to employer. It is not about turning you into a payroll professional. It is about avoiding the easy mistakes that cost time, money and goodwill in the first few months.

Days 90 to 60: get registered and choose your kit

Start with HMRC. Register as an employer before the first payday. You need a PAYE reference, and registration can take up to 15 working days, so do not leave it until the week your new starter begins. If you are a limited company, you may already have a PAYE scheme, but check that it is active and that the correct details are on file.

Next, choose HMRC-recognised payroll software. A spreadsheet is not RTI-compliant on its own. Good payroll software will calculate PAYE, National Insurance, student loan deductions and pension contributions, then send the reports HMRC expects. It also gives you a payslip trail that is much easier to follow if something goes wrong.

Check whether you can claim the Employment Allowance. It can reduce your employer National Insurance bill by up to £10,500, but not every business qualifies, and there are rules about directors and single-person companies. It is worth checking before your first payroll rather than after.

Finally, sort out the pension. Auto-enrolment duties start from the first payday. You can choose a workplace pension scheme, or use postponement for up to three months if it suits your setup, but you still need to communicate the right information to your employee. Do not treat the pension as an afterthought; it is part of the first payslip.

Days 60 to 30: paperwork and payday mechanics

Now for the people side. Carry out a right to work check and keep a copy. Ask your new starter for a starter checklist — not a P45 if this is their first job — so you can work out the correct tax code. Give them a written statement of particulars on or before day one. That is the grown-up name for the contract and key terms.

Decide your pay date and pay period. Weekly, fortnightly or monthly all work, but the date matters for RTI. Your first Full Payment Submission, or FPS, must reach HMRC on or before the day you pay your employee. Late reporting can lead to penalties, especially if it becomes a habit.

Budget for the true cost of employing someone. It is not just gross pay. You may need to add employer National Insurance, pension contributions and any other benefits. A tiny employer can be caught out by thinking only about the wage. The first payslip is much less stressful when the employer costs are already in the bank account.

Days 30 to 0: run the first payroll and report it

Run the first payroll before payday so you have time to check it. Confirm the tax code, the gross pay, any deductions and the net pay. Send the FPS on or before payday. Give your employee a payslip that shows the deductions clearly.

If your employee is eligible for auto-enrolment, enrol them and deduct the employee contribution. The earnings trigger is usually £10,000 a year, and the minimum total contribution is 8%, with at least 3% from the employer. Check the current thresholds and rates before you run payroll, because they can change.

Pay HMRC by the 22nd of the following month if you pay electronically, or the 19th if you pay by post. If your first payday is 25 November, for example, the PAYE payment is normally due by 22 December. Put that date in the diary at the same time as the payday itself.

Common first-payroll mistakes

The first one is treating an employee as self-employed because it feels simpler. That can go badly wrong if HMRC disagrees. The second is missing the FPS deadline. The third is forgetting auto-enrolment until the pension provider asks where the contributions are. The fourth is using the wrong tax code because the starter checklist was rushed. The fifth is failing to budget for employer National Insurance and pension costs. The sixth is paying HMRC late and collecting interest.

None of these are unusual. They are just the lumps that come with doing something for the first time. A 90-day countdown gives you room to make the boring phone calls, set up the software and check the numbers without doing it all in a panic the night before payday.

The first-payday checklist

Before the first payday, confirm your PAYE reference, software, pension scheme, starter checklist, right to work check, pay date and budget for employer costs. On payday, send the FPS and issue the payslip. After payday, pay HMRC by the correct deadline and keep the records. Then repeat. The second payroll is always easier than the first.

If you would rather not learn payroll by trial and error, Knox Accounting can help you set up the first one properly. It is much easier to build good habits at the start than to untangle them later.